State v. Tri-State Telephone & Telegraph Co.

• Decision Date: 24 February 1939
• Docket Number: No. 31572.,31572.
• Parties: STATE v. TRI-STATE TELEPHONE & TELEGRAPH CO. (CITY OF ST. PAUL et al., Interveners).<SMALL><SUP>†</SUP></SMALL>
• Court: Minnesota Supreme Court

284 N.W. 294

204 Minn. 516

STATE v. TRI-STATE TELEPHONE & TELEGRAPH CO. (CITY OF ST. PAUL et al., Interveners).^†

No. 31572.

Supreme Court of Minnesota.

February 24, 1939.

Appeal from District Court, Ramsey County; Gustavus Loevinger, Judge.

Proceeding wherein the Railroad and Warehouse Commission of the state of Minnesota reduced existing rates for exchange services within the St. Paul metropolitan exchange area to be charged by the Tri-State Telephone & Telegraph Company, and wherein the City of St. Paul and the City of South St. Paul intervened. From a judgment of the district court on appeal from the commission's order, the Tri-State Telephone & Telegraph Company appeals.

Judgment affirmed.

C. B. Randall and Ralph A. Stone, both of St. Paul, Tracy J. Peycke and F. E. Randall, both of Omaha, Neb., and E. A. Prendergast, of Minneapolis, for appellant.

John W. McConneloug and Louis P. Sheahan, both of St. Paul, for intervener-respondent City of St. Paul.

Walter T. Ryan, of St. Paul, for intervener-respondent City of South St. Paul.

Wm. S. Ervin, Atty. Gen., and David J. Erickson, Deputy Atty. Gen. (Eugene W. Reed, of St. Paul, of counsel), for respondent.

GALLAGHER, Chief Justice.

Appeal by the Tri-State Telephone and Telegraph Company from a judgment of the district court affirming an order of the railroad and warehouse commission of Minnesota reducing existing rates for exchange services within the St. Paul metropolitan exchange area.¹ Generally stated the issues are (1) whether the findings of the Commission as well as those of the district court constitute a denial of due process; and (2) whether the rates prescribed by the commission and approved by the district court are confiscatory.

The Commission. — Authority to investigate and regulate intrastate telephone rates is placed with the commission. 1 Mason, Minn.St.1927, §§ 4641, 5291. Rate making for the future is an inherently legislative act whether done by the legislature directly or by a subordinate or administrative body to which is delegated the duty of fixing rates in detail, and the orders of such tribunals command the same regard and are subject to the same tests as enactments of the legislature. Chicago & G. T. Ry. Co. v. Wellman, 143 U.S. 339, 12 S.Ct. 400, 36 L.Ed. 176; Knoxville v. Knoxville W. Co., 212 U.S. 1, 29 S.Ct. 148, 53 L.Ed. 371; Bluefield W. W & I. Co. v. Public Service Commission, 262 U.S. 679, 43 S.Ct. 675, 67 L. Ed. 1176; Arizona Grocery Co. v. Atchison, T. & S. F. R. Co., 284 U.S. 370, 52 S.Ct. 183, 76 L.Ed. 348. Being a legislative power, the rate making power implies a range of legislative discretion which necessarily extends to the processes by which the legislative determination is reached. Los Angeles G. & E. Corp. v. Railroad Commission, 289 U.S. 287, 53 S.Ct. 637, 77 L.Ed. 1180; St. Joseph Stock Yards Co. v. United States, 298 U.S. 38, 56 S.Ct. 720, 80 L.Ed. 1033. Where that discretion is free to operate, its choice is uncontrolled by courts exercising supervisory jurisdiction. Dayton P. & L. Co. v. Public Utilities Commission, 292 U.S. 290, 54 S.Ct. 647, 78 L.Ed. 1267.

The Commission's Findings. — An administrative body, even when acting quasi-judicially, is free of many of the procedural checks which circumscribe the action of a court. Interstate Commerce Commission v. Louisville & N. R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431. While the commission must consider all competent evidence, and none that is incompetent, in making its decision (Morgan v. United States, 298 U.S. 468, 56 S. Ct. 906, 80 L.Ed. 1288), the erroneous admission of evidence does not render the order invalid. Northern Pacific Ry. Co. v. Dept. of Public Works, 268 U.S. 39, 45 S.Ct. 412, 69 L.Ed. 836. Failure to follow the rules of judicial hearings does not violate due process so long as the substantial rights of the parties are protected. Tagg Bros. & Moorhead v. United States, 280 U.S. 420, 50 S.Ct. 220, 74 L.Ed. 524. Reduced to its simplest terms, the purpose of a judicial inquiry into an administrative proceeding is to determine whether the substantial rights of the parties are invaded. Chicago & G. T. Ry. Co. v. Wellman, 143 U.S. 339, 12 S.Ct. 400, 36 L.Ed. 176; Los Angeles G. & E. Corp. v. Railroad Commission, 289 U.S. 287, 53 S.Ct. 637, 77 L. Ed. 1180; Dayton P. & L. Co. v. Public Utilities Commission, 292 U.S. 290, 54 S.Ct. 647, 78 L.Ed. 1267.

The Commission's obligation to make findings in rate proceedings is doubly apparent. To avoid the charge of unlawful delegation of authority to fix rates, the legislature must condition its exercise by the Commission, and adherence to the statutory standards must appear in the record of the Commission's act. Minneapolis & St. P. S. R. Co. v. Birchwood, 186 Minn. 563, 244 N. W. 57; Wichita R. & L. Co. v. Public Utilities Commission, 260 U.S. 48, 43 S.Ct. 51, 67 L.Ed. 124; Mahler v. Eby, 264 U.S. 32, 44 S.Ct. 283, 68 L.Ed. 549; St. Louis & O'F. R. Co. v. United States, 279 U.S. 461, 49 S. Ct. 384, 73 L.Ed. 798; United States v. Chicago, M., St. P. & P. R. Co., 294 U.S. 499, 55 S.Ct. 462, 79 L.Ed. 1023; Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S.Ct. 837, 79 L.Ed. 1570, 97 A.L.R. 947. Due process demands that rates be fixed only after a hearing attended by at least the rudiments of fair play. The Commission is in consequence required to base its decision upon the evidence and arguments disclosed at the hearing; its order must be supported by findings of fact which are in turn sustained by the evidence. Interstate Commerce Commission v. Louisville & N. R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431; West Ohio Gas Co. v. Public Utilities Commission, 294 U.S. 63, 55 S. Ct. 316, 79 L.Ed. 761; Acker v. United States, 298 U.S. 426, 56 S.Ct. 824, 80 L.Ed. 1257; Ohio Bell T. Co. v. Public Utilities Commission, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093; Railroad Commission v. Pacific G. & E. Co., 302 U.S. 388, 58 S.Ct. 334, 82 L.Ed. 319.

Recitals in the order of submission to the statutory rules of procedure and decision are inconclusive; compliance with the legislative standard must be evident from the findings of the Commission. Interstate Commerce Commission v. Northern Pacific Ry. Co., 216 U.S. 538, 30 S.Ct. 417, 54 L.Ed. 608; Morgan v. United States, 298 U.S. 468, 56 S.Ct. 906, 80 L.Ed. 1288. Likewise in the case of due process the single finding that existing rates are unreasonable is a conclusion and insufficient unless supported by findings of fact more particularly stated which demonstrate the grounds upon which the conclusion is based so that the court may determine whether the order proceeds from a conscientious consideration of the evidence or is arbitrary. Western Buse T. Co. v. Northwestern Bell T. Co., 188 Minn. 524, 248 N.W. 220; United States v. Chicago, M., St. P. & P. R. Co., 294 U.S. 499, 55 S.Ct. 462, 79 L.Ed. 1023; Ohio Bell T. Co. v. Public Utilities Commission, 301 U.S. 292, 57 S.Ct. 724, 81 L.Ed. 1093.

Observance by the Commission of the statutory prerequisites are not in question, but the Company does contend that the findings² of that body are not sufficiently specific to satisfy due process. From the rules previously propounded, it follows that if the findings are sufficiently specific to permit a court sitting in review to determine whether or not the commission was influenced only by matters properly within its purview in reaching the result, then due process is satisfied. Findings need not be so particular that the manner in which every minute controversy was decided is displayed, for the purpose of review is to discover whether the legislative process has resulted in invasion of a legal or constitutional right and not to examine the manner in which disputes of every caliber were resolved. These rulings are collateral and while, if correct, they might tend to confirm the order, the order might yet be sustained although certain of them are wrong. Interstate Commerce Commission v. Louisville & N. R. Co., 227 U.S. 88, 33 S.Ct. 185, 57 L.Ed. 431; Virginian R. Co. v. United States, 272 U.S. 658, 47 S.Ct. 222, 71 L.Ed. 463; Georgia Ry. & P. Co. v. Railroad Commission, 262 U.S. 625, 43 S.Ct. 680, 67 L.Ed. 1144; Tagg Bros. & Moorhead v. United States, 280 U.S. 420, 50 S.Ct. 220, 74 L.Ed. 524; Los Angeles G. & E. Corp. v. Railroad Commission, 289 U.S. 287, 53 S.Ct. 637, 77 L.Ed. 1180; West v. Chesapeake & P. T. Co., 295 U.S. 662, 55 S.Ct. 894, 79 L.Ed. 1640; American T. & T. Co. v. United States, 299 U.S. 232, 57 S.Ct. 170, 81 L.Ed. 142.

The zone of propriety between the extremes of mere conclusion and undue particularity has never been accurately defined. It has been said that all of the essential facts upon which the order is based must be found. Atchison, T. & S. F. R. Co. v. United States, 295 U.S. 193, 55 S.Ct. 748, 79 L.Ed. 1382; Morgan v. United States, 298 U.S. 468, 56 S.Ct. 906, 80 L.Ed. 1288. On the other hand, the Commission is not obligated to display the weight given by it to any part of the evidence or to disclose the mental operations by which it reached its result. Baltimore & O. Ry. Co. v. United States, 298 U.S. 349, 56 S.Ct. 797, 80 L.Ed. 1209. A candid statement of the reasons and processes by which its findings are reached would be of assistance to the reviewing court, yet the Commission is under no compulsion to expose its methods. Railroad Commission v. Pacific G. & E. Co., 302 U.S. 388, 58 S.Ct. 334, 82 L.Ed. 319. A bare finding of fair value without findings of historical cost and reproduction cost, accrued depreciation, and historical or reproduction cost less depreciation, will not suffice. Each of these items must be specifically found; a figure arrived at by offsets and comparisons without disclosing the sums compared or offset is not in accord with due process. The Minnesota Rate Cases, 230 U.S. 352, 33 S.Ct. 729, 57 L.Ed. 1511, 48 L.R.A.,N.S., 1151, Ann.Cas.1916A, 18; West v. Chesapeake & P. T. Co., 295 U.S. 662, 55...